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ECB Meeting, Democratic Confusion, Green Bonds, Ford – What’s Moving Markets


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By Peter Nurse — The European Central Bank meets in what has been a busy week for central bankers. Across the Atlantic, the Democrats are struggling to agree how to fund their hefty spending package, while corporations increasingly look to the green sector to raise money. Wall Street is set to open higher as the earnings season continues, with Ford shining, while the crude market slips back after a large rise in U.S. inventories. Here’s what you need to know in financial markets on Thursday, 28th October.

1. ECB next with central bankers in focus

The European Central Bank meets later Thursday, in what has been a busy week for the globe’s central bankers, amid growing pressure to act to combat surging prices.

Europe’s central bank will keep policy unchanged at 7:45 AM ET (1145 GMT), and President Christine Lagarde is likely to set the stage for the rolling back of its asset purchase program at its December meeting.

However, she is likely to emphasise once more that the ECB is in no hurry to raise interest rates, even with inflation climbing at the fastest rate since 2008 and with some of its peers already hiking rates or planning to do so.

Earlier Thursday, the Bank of Japan kept its interest rates and asset buying plans unchanged, but cut its economic growth and inflation forecasts. Additionally, the Reserve Bank of Australia chose not to defend its bond-yield target, raising expectations for its November policy meeting on Tuesday.

The Bank of Canada held its key overnight interest rate at 0.25% on Wednesday, and said it was ending its bond-buying program. It also signalled it could hike interest rates as soon as April 2022. 

2. Democrats struggle over spending bill

Democrats in the House and Senate were unable Wednesday to come to an agreement over how to pay for the party’s proposed massive spending bill.

This follows the head of the House tax-writing committee saying a proposal to put a levy on the assets of billionaires has been dropped in negotiations over revenue measures to pay for the bill.

President Joe Biden will now go to Capitol Hill on Thursday, Reuters reported, to try and secure an agreement, or at least a framework of one, on his broad spending plan before he departs for a gathering of the Group of 20 leaders in Rome, followed by the United Nations climate summit in Scotland. 

His struggle to deliver on his legislative agenda has raised doubts that the U.S. can lead the world in fighting climate change or the post-pandemic economic recovery.

3. Stocks to edge higher; Ford shines

U.S. stocks are set to open higher, continuing the strong tone generated by a largely positive earnings season, with Ford set to shine.

By 5:10 AM ET (0910 GMT), Dow Jones futures were up 50 points, or 0.1%, S&P 500 futures gained 10 points, or 0.2%, and Nasdaq 100 futures rose 75 points, or 0.5%.

Ford stock traded 9% higher premarket after the auto giant reported a stronger-than-expected third-quarter profit late Wednesday and raised its full-year earnings forecast as strong demand for its trucks helped offset the hit from a global semiconductor shortage.

The earnings deluge is set to continue Thursday, with iPhone maker Apple (NASDAQ:AAPL), the largest company in the world, and online retail giant Amazon (NASDAQ:AMZN) in the spotlight.

Investors will also study closely the first estimate for third-quarter annualized gross domestic product growth. The release is expected to show growth slowed to 2.7%, its slowest pace in more than a year and down from the previous quarter’s 6.7% growth,, as supply-side bottlenecks and Covid-19 infections weighed.

4. Green issuance to soar

Corporations are under growing pressure from investors to improve their green credentials, and have started to respond with the issuance of environment, social and governance bonds to raise money for low-carbon projects.

Investment in these so-called green bonds is expected to double and reach $1 trillion for the first time in a single year by the end of 2022, according to a survey by the Climate Bonds Initiative Thursday.

The London-based non-profit body also forecast that green bond issuance will reach a record high of $500 billion this year, up from $297 billion recorded last year.

5. Crude suffers consecutive losses on U.S. inventories, Iran talks

Oil prices sold off Thursday, falling for the second day in a row after official figures showed a surprisingly large jump in U.S. crude oil stockpiles last week.

By 5:10 AM ET, U.S. crude futures were down 0.6% at $82.19 a barrel, hitting a one-week low, after dropping 2.4% on Wednesday. Brent futures dropped 0.7% at $83.30 a barrel, falling to its lowest level in two weeks having dropped over 2% during the previous session.

U.S. crude stocks rose by 4.3 million barrels last week, the U.S. Energy Department said late Wednesday, more than double the 1.9 million-barrel gain expected and way above the 2.3 million-barrel gain suggested by the industry-funded American Petroleum Institute on Tuesday.

Adding to the negative sentiment was the news from Iran’s top nuclear negotiator that Tehran is set to resume talks aimed at reviving its 2015 nuclear deal by the end of November. Iran is seeking to remove U.S. sanctions prohibiting the sales of its oil to the world, and the last time the parties met was in June.

European natural gas prices also fell Thursday after Russian President Vladimir Putin ordered Gazprom (MCX:GAZP) to focus on filling its European storage sites from Nov. 8, a day after it completes the process in Russia. 

The move will “create a more favourable situation on the European energy market,” Putin said at a meeting broadcast on state television Wednesday.

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